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National minimum wages, capital mobility, and global economic growth

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  • Irmen, Andreas
  • Wigger, Berthold U.

Abstract

How do national minimum wages affect global economic growth? We address this question in a two-country endogenous growth model with capital mobility that emphasizes a link between wages, savings and growth. We identify the conditions on technology and national preferences that determine whether national minimum wages are a stimulus or an obstacle to growth. Technology matters because it determines the functional distribution of global income as well as output effects associated with the emergence of national unemployment due to minimum wages. Interestingly, differences in national savings propensities do not only affect the strength of the growth effect associated with minimum wages but may even determine its direction.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 90 (2006)
Issue (Month): 2 (February)
Pages: 285-289

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Handle: RePEc:eee:ecolet:v:90:y:2006:i:2:p:285-289

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 478-94, June.
  3. Davis, Donald R., 1998. "Technology, unemployment, and relative wages in a global economy," European Economic Review, Elsevier, Elsevier, vol. 42(9), pages 1613-1633, November.
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Cited by:
  1. Andreas Irmen, 2009. "Frictional unemployment, labor market institutions, and endogenous economic growth," Economics Bulletin, AccessEcon, vol. 29(2), pages 1127-1138.
  2. Sung Min Mun & Byoung Hark Yoo, 2012. "The Effects of Inter-Korean Integration Type on Economic Performance: The Role of Wage Policy," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 26(3), pages 447-470, September.
  3. Luciano Fanti & Luca Gori, 2009. "On economic growth and minimum wages," Discussion Papers 2009/78, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  4. Stauvermann, Peter J. & Ky, Sereyvath & Nam, Gi-Yu, 2013. "The Costs of Increasing the Fertility Rate in an Endogenous Growth Model," MPRA Paper 46381, University Library of Munich, Germany.

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